2016 (11) TMI 1065 - ITAT MUMBAI

2016 (11) TMI 1065 - ITAT MUMBAI - TMI - Penalty u/s. 271(1)(c) - incorrect claim of set off of unabsorbed depreciation - claim voluntarily rectified by filing Revised Computation during the assessment proceedings - Held that:- Claim was made without any personal knowledge or involvement of the assessee. There is uniformity in the averments made by both the above said persons. None of the lower authorities have deemed it necessary to cross examine either of these persons and without their cross .....

pproach to the lower authorities in this case has been that since incorrect claim has been made, then penalty must be levied irrespective of the fact whether the incorrect claim was as a result of bonafide mistake or a genuine human error or otherwise. Thus, we find that penalty in this case has been wrongly levied and therefore, same is directed to be deleted. - Decided in favour of assessee. - ITA NO.1073/Mum/2015 - Dated:- 7-10-2016 - Shri Sanjay Garg, Judicial Member, and Shri Ashwani Taneja .....

he case and in law: 1. The leaned CIT(A) erred in confirming the penalty u/s. 271(1)(c) of ₹ 35,00,000/- in respect to inadvertent claim of set off of unabsorbed depreciation of ₹ 75,07,162/- although the same was voluntarily rectified by filing Revised Computation during the assessment proceedings. The learned AO failed to take into consideration that the inadvertent mistake while filing the return was on account of the Accountant, Mr. Surendra Gupta and the Chartered Accountant, Mr .....

e course of hearing, arguments were made by Shri H.P. Mahajani, & Shri Karthik Natarajan, Authorised Representative (AR) on behalf of the Assessee and by Shri B.S. Bist, Departmental Representative (DR) on behalf of the Revenue. 3. The only issue arising in this appeal is whether levy of penalty u/s 271(1)(c) on incorrect claim of set off of unabsorbed depreciation of ₹ 75,07,162/- is justified under the law in the given facts of this case. The case of the AO is that claim of set off o .....

by the AO should be deleted. 3.1. Both the parties have made their respective arguments before us. Ld. DR has supported the stand of the AO as well as Ld. CIT(A) in holding that the claim of the assessee being totally incorrect makes her liable for levy of penalty. It was also submitted that assessee had filed the revised return only because the assessee was cornered and in absence of scrutiny of the return of the assessee, the claim would have escaped the attention and therefore, assessee woul .....

e conduct of the assessee would show that the claim was made inadvertently by the assessee on account of inadvertent mistake made by the accountant namely Mr. Surendra Gupta. It was submitted that admittedly in this case the claim made was incorrect on the face of it and it is also true that scrutiny proceedings were initiated by the AO before the assessee could file revised return. But, it is also true that no query was asked with regard to any claim of depreciation on plant and machinery by th .....

d to set off of depreciation was made on the basis of the information which was already held on record of the AO in the return of this year as well as records of earlier years. The concept of human probability suggests that the assessee would not make an incorrect claim based upon an information which is already available on record and no sane person would take such a risk to invite burden of tax, interest, penalty and prosecution. Thus, all the facts and circumstances of the case suggest that i .....

h regard to levy of penalty under such cases. It is well settled law that penalty proceeding are independent of the assessment proceedings. The parameters for determining the tax liability and for levying the penalty are quite different from each other under the law. Thus, as a natural corollary, it can be said that making of addition/disallowance by the AO should not automatically lead to levy of penalty also by the AO. For the purpose of levy of penalty, there must be concealment or furnishing .....

ncealed. 3.4. In the case before us, the only explanation given by the assessee is that it is a case of bonafide mistake on the part of assessee and her staff. Thus, for the purpose of finding out and determining whether the assessee offered an explanation and whether the said explanation can be held to be bonafide so as to meet the parameters of section 271(1)(c), the same has to be tested on the anvil of facts of each case. Now, the law in this regard has been well settled after the judgment o .....

ses is that whether the case of the assessee would fall into the category of a bonafide mistake , or an inadvertent or genuine human error , and if yes then assessee s case would fall outside the net of penal provisions contained in section 271(1)(c). 3.5. Thus, what emerges from the legal position as discussed above is that merely because the claim made by the assessee on account of set off of unabsorbed depreciation was rejected by the AO, it would not automatically lead to the levy of penalty .....

h the assistance of the representatives of both the parties, it is noticed by us that assessee filed its original return within time as stipulated u/s 139(1) on 29.09.2008. In the said return, assessee made claim of set off of unabsorbed depreciation amounting to ₹ 75,07,162/- and also gave year-wise breakup of unabsorbed depreciation available to the assessee by way of a table on the bottom of computation sheet. Subsequently, notice was issued u/s 143(2) of the Act, dated 06.08.2009 where .....

the assessee voluntarily filed a revised return on 26.07.2010 and withdrew the incorrect claim of set off of unabsorbed depreciation and also paid the tax arising thereon, on voluntary basis. Now, under these circumstances, the case of the lower authorities is that it was a deliberate attempt on the part of the assessee to make an excessive claim and in case scrutiny proceedings would not have taken place, then assessee would have gone scot-free. Whereas the assessee says it was purely a case o .....

t of unabsorbed depreciation was earlier available, but the same was exhausted in the immediately preceding year. It is further noted that in the computation sheet filed along with the return of A.Y. 2007-08 also, the assessee had given a similar table at the bottom of the computation sheet shown year-wise breakup of availability of unabsorbed depreciation wherein the entire claim has been set off and exhausted in A.Y. 2007-08 itself. Assessee has contended that while preparing the computation s .....

t had picked up, copied and pasted Proforma of computation sheet of A.Y. 2007-08. During this process, the table containing year-wise breakup of unabsorbed depreciation has been copied and pasted as it is. We can say it so also for the reason that there seems to be a substance in the explanation of the assessee that an assessee shall not make misadventure of this type where the entire information is already available on the record of the AO in current year s return and easily cross verifiable wi .....

d affidavits from Mr. Surendra Gupta (Accountant of the assessee) and Mr. Snehal Uttarwar, Chartered Accountant (Consultant of the assessee). Both of the affidavits are duly sworn on oath. In these affidavits, facts have been deposed on oath and averments have been made. Relevant portion of the affidavit of Mr. Surendra Gupta is reproduced and discussed hereunder for the sake of ready reverence: …..4. The assessee had at the time of filing its original return on my advise, erroneously cla .....

ependent on my advise. Once the Return of income is prepared, she only signs it. 5. However subsequently, the case was picked up for scrutiny, and while I was studying the facts of the case, I noticed that I had made the assessee made a wrong claim of set off of unabsorbed depreciation and therefore I advised the Assessee to immediately file a Revised Return. Therefore, the assessee voluntarily filed the Revise Return during the course of the assessment proceedings u/s 143(3), thereby withdrawin .....

2008 - 2009. The entire accounts writing and tax return filing work was done by the Accountant appointed by the Assessee. 2. My scope of work included over-seeing the final computation of Income made the Accountant. 3. The Assessee is assessed to income-tax under P.A.No. AAIPA1690A. During the AY 2008-09, the Assessee derived income from House Property, Business/ Profession, Capital Gain and Other Sources. 4. For Asst. Year 2008-09, the accountant finalized her books of accounts and computed the .....

s dependent on the preparation of the Return by the Accountant and my over-seeing function. Once the Return of income is prepared Accountant and overseen by me, she only signs it. 7. Subsequently, the case was picked up for scrutiny, and while the Accountant was studying the facts of the case, he noticed the excess claim of the said unabsorbed depreciation and brought the same also in my notice and accordingly immediately I advised the Assessee to file revised return during the course of assessm .....

ted, the Revised Return cannot said to be invalid. 10. The learned AO failed to take into consideration that on perusal of the Notice u/s. 142(1) dated 13-07-2010 along with the a questionnaire asking for various details, there was neither any question nor any clarification was sought in respect to the claim of set off of brought forward unabsorbed depreciation. The Assessee has voluntarily revised its return of income when the inadvertent mistake came to her knowledge. 11. It is for the reasons .....

er authorities have deemed it necessary to cross examine either of these persons and without their cross examination lower authorities have chosen to disbelieve the averments made on oath by these persons. In our view, the approach followed by the lower authorities is neither fair nor justified. The penal provisions are quite harsh in nature, in as much as, confirmation of the penalty may lead to prosecution of the assessee. Therefore, the revenue officials are expected to observe due diligence .....